US Crude Subdued at Start of Week

US crude futures are showing limited movement on Monday, continuing the lack of activity which marked the Friday session. US crude is trading at $43.74 per barrel in the North American session. Brent crude futures are trading at $45.42, as the Brent premium stands at $1.68. On the release front, it’s a quiet start to the week, with just one US event on the calendar. New Home Sales came in at 511 thousand, short of the estimate. On Tuesday, the US releases two major events – Core Durable Goods Orders and CB Consumer Confidence.

US housing data continue to post mixed results. New Home Sales showed little movement, edging lower to 511 thousand. This figure was well short of the forecast of 521 thousand. Last week, Existing Home Sales rebounded with a reading of 5.33 million, up from 5.08 million a month earlier. However, Housing Starts and Building Permits both fell short of expectations. This beat the estimate of 5.29 million. On Wednesday, we’ll get another look at key housing numbers, with the release of Pending Home Sales.

The collapse in oil prices has, not surprisingly, meant huge losses for oil producers. The six Middle Eastern Gulf states (Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Oman and Kuwait), whose economies are almost entirely dependent on oil revenue, have been hit particularly hard, according to an IMF report. These countries lost $390 billion in revenue due to weak oil prices in 2015 compared to a year earlier, and that figure could jump to between $490 billion and $540 billion compared to 2o14. This has resulted in downgraded growth forecasts and growing budget deficits for countries that until now had little incentive to diversify. With oil prices unlikely to rebound to high levels anytime soon, the plunge in crude prices is a game-changer, as the Gulf producers and other oil exporting countries are scrambling to find other ways to raise revenue and keep their economies afloat as revenue from oil has nosedived.

The US manufacturing sector remains a sore spot in the generally strong economy. Last week, the Philly Fed Manufacturing Index surprised the markets with a decline of -1.6 points, as the estimate stood at 8.1 points. This reading marked the third decline in four readings, as the manufacturing sector remains a weak area of the US economy. On Friday, US Flash Manufacturing PMI dipped to 50.8 points, shy of the forecast of 51.9 points. Although the reading did point to a slight improvement in manufacturing business conditions, it marked the PMI’s weakest release since September 2009. Uncertainty in global economic conditions has lead to weaker demand for US goods and weakened the manufacturing sector, a trend which has negatively affected producers in the US and elsewhere, such as the Eurozone and Japan. Meanwhile, the robust US labor market continues to impress. The weekly unemployment claims indicator fell to 247 thousand on Friday, well below the forecast of 265 thousand. This was the lowest weekly count since November 1973. As well, the unemployment claims four-week moving average, which is considered more accurate than the weekly indicator, also dropped compared to the previous release.

WTI/USD Fundamentals

Monday (April 25)

10:00 US New Home Sales. Estimate 521K. Actual 511K

Tuesday (April 26)

18:30 US Core Durable Goods Orders. Estimate 0.6%

10:00 US CB Consumer Confidence. Estimate 95.8 points

*Key events are in bold

*All release times are EDT

WTI/USD for Monday, April 25, 2016

WTI/USD April 25 at 10:40 EDT

Open: 43.30 Low: 43.11 High: 43.97 Close: 43.30

WTI/USD Technical

S3

S2

S1

R1

R2

R3

35.09

37.75

40.00

43.45

46.69

50.13

WTI/USD has shown limited movement in the Monday session

40.00 is providing support

There is weak resistance at 43.45. This line was tested earlier and could break during the day

Further levels in both directions:

Below: 40.00, 37.75, 35.09 and 32.22

Above: 43.45, 46.69 and 50.13

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.

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